2024 Tax Highlights

Welcome to the Tax E Man Blog. Tax E Man, along with the website, PatTax.net, are provided by Baldwin, NY Tax Preparation Service Pat Tax Inc and Enrolled Agent Patrick White.

The Tax E Man Blog has 2 parts. part 1 provides a brief topic overview. Part 2 is accessed by clicking embedded links which provide more in-depth topic information.

2024 Tax Highlights

This year has not seen major changes to federal tax law. However, two significant acts—the SECURE Act 2.0 and the Inflation Reduction Act—continue to influence various provisions.

Energy Credits for Vehicles

If you purchased a qualifying clean vehicle in 2024, you may be eligible for a nonrefundable credit up to $7,500 for a new vehicle, or $4,000 for a used one. Various costs, content, and income requirements must be met. A “time of sale” report from the dealer is needed to claim the credit, which can be transferred to the dealer for a reduced purchase price.

Energy Credits for Home Improvements

Homeowners making energy-efficient improvements can qualify for annual tax credits up to $3,200, with the lifetime limit removed. The Energy Efficient Home Improvement Credit covers 30% of expenses such as doors, windows, insulation, and audits. The Residential Clean Energy Credit also covers 30% of expenses for solar, wind, and geothermal systems. Both credits require manufacturer certification.

Read Tax Highlights-Deeper Dive Here

Form 1099-K

You may receive a Form 1099-K for accepting payment cards or third-party network payments if transactions exceed $5,000 in 2024.

Premium Tax Credit

If you or a family member enrolled in health insurance through the Marketplace and received advance payments of the Premium Tax Credit, you must file Form 8962 with your return. The Marketplace will send Form 1095-A by January 31, 2025, listing necessary information. Failure to include Form 8962 may result in return rejection or refund delays.

Student Loan Forgiveness

Debt forgiveness is usually taxable, but student loan forgiveness from 2021 to 2025 is generally not federally taxable unless services were provided to the discharging lender. State laws may vary.

Read Tax Highlights-Deeper Dive Here

Year-End Tax Planning

Strategies for year-end tax planning include maximizing retirement plan contributions, gains and losses from investments, and charitable contributions. You can make IRA and HSA contributions for 2024 until April 15, 2025.

IRA and HSA

For 2024, you can contribute up to $7,000 ($8,000 if age 50 or older) to an IRA, with contributions deductible on your tax return. HSA contributions also offer deductions, with limits ranging from $4,150 to $10,300 based on coverage type and age.

IRS Focus Areas

The IRS continues to emphasize foreign asset reporting and digital assets. Severe penalties apply for failing to report foreign assets. Digital assets like NFTs and cryptocurrencies are taxable and must be reported.

Read Tax Highlights-Deeper Dive Here

Unreported Income

All income needs to be declared on your tax return to avoid penalties. This includes extra money earned through side jobs such as ridesharing, selling crafts, delivering meals, dog-walking, or renting out property via an online rental company. Foreign income, barter income, and other earned income must be reported, even if not documented on Form 1099.

Federal and State Tax Differences

Remember, state tax laws can differ from federal ones. Ensure you provide all income and expenses to your tax preparer to maximize benefits on your state return.

The information provided in the 2024 Tax Highlights is for informational purposes only and should not be considered as tax advice. We strongly recommend consulting with your tax professional before acting on any of the information presented here.

Pat White, EA

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Individual Retirement Accounts-Roth IRAs

Tax E Man — Tax Consultation, Preparation, Representation

IRA Senior

Roth IRAs

Roth IRA Contribution Limits—2016
Lesser of: Taxable compensation for the year, or:
Under age 50………………………………………………………………………. $ 5,500
Age 50 or older……………………………………………………………………. $ 6,500

What is a Roth IRA?
A Roth IRA is an individual retirement arrangement. It is a personal savings plan that gives you tax advantages for setting aside money for retirement. An account must be designated as a Roth IRA when opened. Roth IRA tax advantages and rules compared to a traditional IRA:

Contributions are not deductible. Active participation in an employer plan is irrelevant.
If certain requirements are satisfied for qualified distributions, distributions are tax free.
Can withdraw contributions any time for any reason without owing taxes or penalties.
Contributions can be made after the participant reaches age 70½.
The required minimum distribution (RMD) rules do not apply. Distributions are not required until death of the participant.
Contributions are not allowed when modified adjusted gross income (MAGI) is above certain limits
Neither a SEP IRA nor a SIMPLE IRA can be set up as a Roth IRA

Click and Read 2016 Individual Retirement Accounts Roth IRAs Here

Who Can Contribute to a Roth IRA?
Generally, you can contribute to a Roth IRA if you have taxable compensation and income less than the top of the phase-out range for your filing status, see Roth IRA
Phase-outs chart, in link below..

Click and Read 2016 Individual Retirement Accounts Roth IRAs Here

Any accounting, business or tax advice contained in the Tax E Man Blog or www.PatTax.net, including attachments, links and enclosures, are not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax related penalties.

If desired, Pat Tax, Inc. would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired.

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Pat Tax, Inc. . Please feel free to contact us with any questions or concerns.

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Health Care Reform Cost Sharing Subsidy for Individuals with High-Deductible Plans

2016 ACA

Cost Sharing Subsidy for Individuals with High-Deductible Plans

Out-Of-Pocket Expense Limits
The health care reform law provides for a cost-sharing subsidy to reduce the maximum annual deductible and out-of-pocket expense limits for high-deductible health
plans for individuals and households between 100% and 400% of the federal poverty level (FPL). A high deductible health plan is currently $6,450 for self-only coverage in 2015 and $12,900 for family coverage in 2015. High-deductible health plans are those plans that
qualify the taxpayer to contribute to a health savings account (HSA) (or allow an employer to contribute to the HSA of an employee).

2016 Health Care Reform Cost Sharing Subsidy for Individuals with High-Deductible Plans

Note: The individual does not have to contribute to an HSA to qualify for the subsidy. The individual merely has to have a high-deductible health plan and fall within the FPL income range.

Note: Individuals below 133% of FPL are generally eligible for Medicaid coverage under the health care reform law.

2016 Health Care Reform Cost Sharing Subsidy for Individuals with High-Deductible Plans

Calculation of Subsidy
For individuals with household income of more than 100%, but not more than 200% of FPL, the out-of-pocket limit is reduced by two-thirds. For those between 201%
and 300% of FPL, the out-of-pocket limit is reduced by one-half, and for those between 301% and 400% of FPL, the out-of-pocket limit is reduced by one-third.

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Repairs vs Improvements

2016 Repairs vs Improvements

Repairs vs. Improvements

Internal Revenue Code section 162 generally allows a current business deduction for the cost of repairs and maintenance incurred during the year. On the other hand, Internal Revenue Code section 263 requires the capitalization of amounts paid to acquire, produce, or improve tangible property. Since repairs and improvements often have very similar characteristics, it can be tricky to classify the expenditures. However, correct classification is important because the cost of repairs can generally be deducted in the year paid, while improvements must be capitalized and the deduction taken over several years through depreciation.

Click and Read Repairs vs Improvements Here

An improvement requiring capitalization occurs with an addition to or partial replacement of property that results in a betterment of the unit of property, restores the unit of property, or adapts the unit of property to a new use. The cost of an improvement must be capitalized and depreciated over a certain number of years as if the improvement were separate property.

Example: Nina has a truck she uses for her contracting business. Her truck was damaged and the cost to repair it is considered a deductible repair cost. Routine maintenance on the truck such as engine tune-ups and oil changes are also currently deductible expenses. In 2015, Nina added a hydraulic lift to her truck, which improved its functionality. The expense of adding the lift is an improvement that must be capitalized and depreciated over the truck’s remaining useful life.

Click and Read Repairs vs Improvements Here

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Employee or Independent Contractor ?

Employee or Independent Contractor

Employee or Independent Contractor?

In order for a business owner to know how to treat payments made to workers for services, he or she must first know the business relationship that exists between the business and the person performing the services. A worker’s status determines what taxes are paid and who is responsible for reporting and paying those taxes. A worker performing services for a business is generally an employee or an independent contractor. If a worker is classified incorrectly, the IRS may assess penalties on the employer for nonpayment of certain taxes.

Penalties and Interest
When the IRS determines that a worker is actually an employee rather than an independent contractor, the employer is subject to penalties for failure to withhold
and remit income, FICA (Social Security and Medicare) and FUTA (federal unemployment tax) taxes, interest on the underpaid amounts, and penalties for failure to file information returns. The state will also seek to collect workers’ compensation and unemployment compensation premiums for unreported wages.

Click and Read Employee or Independent Contractor Here

Independent Contractor
An independent contractor is self-employed and is generally responsible for paying his or her own taxes through estimated tax payments. A business issues Form 1099-MISC, Miscellaneous Income, to any one independent contractor, subcontractor, freelancer, etc.,
to whom the business made $600 or more in payments over the course of the tax year. The business is not generally responsible for withholding income tax or FICA.

Employee
A worker treated as an employee will be issued Form W-2 for wages paid. The business hiring the worker is responsible for withholding income tax and FICA. The employer is also liable for FUTA and various state employment taxes. Also, the employee may be eligible for certain fringe benefits offered by the employer, such as health care.

Click and Read Employee or Independent Contractor Here

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Your Rights as a Taxpayer-The Taxpayer Bill of Rights

As stated by the Internal Revenue Service (IRS), their Mission is to

Provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all

It was toward this end that the Taxpayer Bill of Rights were created by the IRS and incorporated into IRS Publication 1. The Taxpayer Bill of Rights contain 10 provisions compiled by the Internal Revenue Service that “take the multiple existing rights embedded in the tax code and groups them into 10 broad categories making them more visible and easier for taxpayers to find.”.

Read Taxpayer Bill of Rights Here

The 10 Taxpayer Rights are:

The Right to Be Informed
The Right to Quality Service
The Right to Pay No More than the Correct Amount of Tax
The Right to Challenge the IRS’s Position and Be Heard
The Right to Appeal an IRS Decision in an Independent Forum
The Right to Finality
The Right to Privacy
The Right to Confidentiality
The Right to Retain Representation
The Right to a Fair and Just Tax System

As stated in Right 9, tax payers have “The Right to Retain Representation”. Patrick White, the president of Pat Tax Inc. is Enrolled to Practice to Practice Before the Internal Revenue Service and as such is authorized to represent taxpayers.

Pat can be contacted at 917 533-8475 or email: PatTaxHelp@gmail.com with any questions or concerns on tax preparation, consultation or representation.

Read Taxpayer Bill of Rights Here

“Empowering clients through education, a stress free transaction and an excellent service experience.”

Moving Out Worksheet

The Tax E Man Blog, along with our website www.PatTax.net, are designed to be year round resources for tax consultation, preparation and representation services provided by Baldwin NY Tax Preparation service Pat Tax Inc. and Patrick White, Enrolled Agent . Please feel free to contact us with any questions or concerns.

Moving Out Worksheet

This worksheet is geared toward helping young people determine whether they have the financial means to move out on their own and maintain their desired lifestyle. One-time or yearly costs are listed as lump sums. Periodic costs are computed on a monthly basis.

Read Moving Out Worksheet Here

“Empowering clients through education, a stress free transaction and an excellent service experience.”

College Financial Aid Planning

Individuals who want to attend college but cannot afford the costs outright must find alternative funding through various types of financial aid. Many factors affect eligibility for federal financial aid; therefore, all students should apply for financial aid every year even if they think they do not otherwise qualify.

Read College Financial Aid Planning Here

FAFSA
The Free Application for Federal Student Aid (FAFSA) is the first step in the financial aid process. Students use the FAFSA to apply for federal student aid, such as grants, loans, and work-study. The FAFSA must be submitted for each year the student wants financial aid.

Income Tax Return
If the student (or parents) needs to file a 2015 income tax return with the IRS, it is recommended that it is completed before filling out the FAFSA.

Expected Family Contribution
The questions on the FAFSA are required to calculate the student’s Expected Family Contribution (EFC). The EFC measures the student’s family’s financial strength and is used to determine the student’s eligibility for federal student aid. The EFC is split between an expected amount contributed from the student (usually more) and an expected amount
being contributed from the parents.

Read College Financial Aid Planning Here

Student Aid Report
A student’s EFC will be listed on their Student Aid Report (SAR). The SAR summarizes the information submitted on the student’s FAFSA.

Financial Need
Financial need is the difference between the EFC and the college’s cost of attendance (which can include living expenses), as determined by the college. The college will use the student’s EFC to prepare a financial aid package to help meet financial need.

Read College Financial Aid Planning Here

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